Tesla delivery slide may stretch to third year, some fear, as cash burn looms

Tesla Faces Mounting Delivery Decline Amid Cash Burn and Investor Pressure

Analysis of Tesla's Delivery Challenges and Financial Outlook

By Abhirup Roy and Akash Sriram

Declining Delivery Estimates and Growth Projections

SAN FRANCISCO, March 11 (Reuters) - Tesla investors and analysts are cutting estimates for its electric vehicle deliveries and some are now expecting a third straight year of decline, pressuring profit as CEO Elon Musk refocuses on the expensive goals of launching robotaxis and humanoid robots.

Wall Street has expected Tesla to break its losing streak of declining car sales in 2026, but that is changing fast. Analysts have more than halved their growth forecast to about 3.8% from 8.2% in January and some high-profile Tesla watchers, including Morgan Stanley and Morningstar, which now project declines.

The shift comes as Tesla plans to double its capital expenditures to over $20 billion, and Wall Street now expects that Tesla will be spending more cash than it takes in, a switch from seven years of positive cash flow.

Tesla is hit by the loss of U.S. EV tax credits and tougher competition in Europe, where it still lacks approval for its self-driving software, Morningstar analyst Seth Goldstein said, estimating a nearly 5% drop in vehicle deliveries this year.

"If I look at two of the three largest markets, I'm seeing a decline," Goldstein said. "So globally, I'm forecasting a third straight year of deliveries decline in 2026."

Expectations for deliveries in 2026 have been edging down gradually over recent quarters, according to Visible Alpha data, and recent months mark a clear shift, with some estimates pointing to an outright decline.

Goldstein and others also cited as a key concern weak uptake of Tesla's recently launched cheaper, stripped-down versions of its best-selling models.

Investor Optimism Beyond Core Car Business

To be sure, investors see Tesla's future as bright because of prospects for self-driving software, robotaxis and humanoid robots, rather than the core car business.

In addition, the projected spending is not an immediate threat to Tesla, which ended 2025 with $44.06 billion in cash, cash equivalents and investments, and CFO Vaibhav Taneja said in January that the company might look into funding its spending through debt or other means after using internal resources.

Pressure on Musk Intensifies

PRESSURE ON MUSK INTENSIFIES

Still, falling auto sales increase pressure on Musk to deliver fully autonomous driving software and robots, which underpin Tesla's $1.5 trillion valuation as car sales still account for most revenue.

Tesla struck a guarded tone in its latest shareholder presentation in January, saying it was focused on "maximum capacity utilization" and that deliveries would be affected by aggregate demand, supply-chain readiness and allocation decisions.

Since hitting an all-time high on December 22, Tesla shares have dropped over 20%. Since then, the broader S&P 500 index has fallen a little over 1% up to Tuesday's close.

Demand Revival Efforts and Market Response

DEMAND REVIVAL EFFORTS SEEN FALTERING

Tesla's deliveries fell for the first time in 2024 due to high borrowing costs, an aging lineup and poor reception of its only new model - the Cybertruck. The fall deepened in 2025 amid backlash over Musk's political turn, embracing President Donald Trump in the United States and Germany's far-right party, the AfD.

Price Cuts and Model Updates

Efforts to rekindle demand, including rolling out more inexpensive, stripped-down variants of its Model Y SUV and Model 3 compact sedan, priced about $5,000 below their cheapest predecessors, have so far fallen short of expectations, analysts said.

The price cut was not enough to offset the lost EV tax credits, said Sam Fiorani, vice president at research firm AutoForecast Solutions.

Competition and Market Share

"The updates to the Model 3 and Model Y were not radical enough to grow all of its market share back in the face of a range of distinctly styled and nicely featured competition," he said.

Sales in Europe showed some early signs of stabilization last month, but are still far from a recovery. Tesla's China-made electric vehicle sales climbed for the fourth consecutive month in February, as a favorable comparison from the prior year offset the typical seasonal headwinds.

Cash Flow Concerns and Financial Implications

CASH FLOW CONCERNS MOUNT

After last year's sales drop, Tesla ceded its crown as the world's top EV maker to China's BYD. Any further decline could hurt its ability to self-fund Musk's ambitions outside autos.

Analysts have also been steadily reducing their estimates for Tesla's revenue from automotive sales in 2026 - they now expect the company to generate about $72 billion, down from nearly $138 billion they were expecting two years ago.

Capital Expenditures and Cash Burn

Substantial cash reserves and growth in energy and services have offered some comfort, but Tesla's plans to double capital expenditures this year have sparked cash-flow concerns.

While higher capital spending is needed for Tesla's ambitions in autonomous vehicles, robotics and energy, the cash burn could weigh on the stock and the company's valuation, Morgan Stanley analyst Adam Jonas said in a note. Jonas expects the company to burn over $8 billion in 2026.

Wall Street now expects a negative free cash flow of about $5.19 billion on average, a sharp reversal from previous expectations of generating $2.27 billion, according to LSEG data.

Investor Sentiment and Future Outlook

But investors, focused on progress in sales of Tesla's self-driving software and the rollout of robotaxis, will be happy as long as the fall in vehicle deliveries does not accelerate, said Tesla investor Gene Munster, a managing partner at Deepwater Asset Management.

Zero growth is a "win" and a decline smaller than last year is "neutral," he said. "If the decline quickens, that's a problem."

(Reporting by Abhirup Roy in San Francisco and Akash Sriram in Bengaluru; Editing by Peter Henderson and Matthew Lewis)